The Securities and Futures Commission (SFC) of Hong Kong has reprimanded and fined Merrill Lynch Far East (MLFE) and Merrill Lynch Asia Pacific (MLAP) a combined amount of HK$15m ($1.93m) for internal control failures.
The fine was imposed on the two entities following a review on their internal controls in the last quarter of 2016 associated with their reporting of large open positions (LOP), electronic trading systems, distribution of research reports involving futures contracts, and disclosure of market making activities in research reports.
The review unveiled that MLFE failed to ensure compliance with LOP reporting requirements in some cases since May 2006. The company also failed to implement formal governance for policies when the electronic trading regulations became effective on 1 January 2014.
In case of MLAP, the review revealed that the firm failed to comply with the requirement to secure a licence for regulated activities prior to conducting business on futures contracts between May 2005 and August 2016.
The firm also failed to disclose it was a market maker in the relevant securities in research reports distributed to clients between May 2011 and November 2016, the review report noted.
However, the regulator also said that the cooperation of both the entities in the matter helped expedite the disciplinary proceedings and resulted in a lower fine.
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